Quote from @Collin Van der Veen:
A little over a year ago, my good buddy and business-partner-in-crime, @Reed Baker and I purchased our first investment property. They say the first property is always the hardest, and we're hoping they're right. Here are our 10 main takeaways after 1-year of property ownership:
1.) Sourcing the right deal is everything
Leverage both the MLS and off-market sourcing strategies. The bigger the sourcing funnel at the top, the better the numbers will pencil out at the bottom.
2.) Developing the right network is crucial
After months of driving for dollars/cold calling brokers, we crossed paths with a local investor who was looking to offload a property. The more people you put in your court, the more likely the court is to tilt in your favor.
3.) If you find the right deal it will finance itself
Balling on a budget as penny-pinching college students, 20% down seemed pretty steep. Once we finally found the right deal and saw how favorably the numbers penciled out, raising equity was the easiest part of the process.
4.) Never underestimate the power of a good mentor
We were incredibly lucky to have a trusted friend and experienced RE investor in our corner who we could bounce stupid questions off whenever we hit a roadblock. Having a mentor who wants to see you succeed is truly invaluable.
5.) There is no such thing as an unsolvable problem
Real estate is a game of solving problems. Whether it's figuring out how to get a transaction across the finish line, or trying to recover after hiring an inexperienced contractor, there is always a solution.
6.) Budget for problems
Make sure to have a bulletproof reserve balance from day one. Everything is always more expensive than you think it will be.
7.) Tenants can make your life great or they can make it miserable - don't let just anyone live in your property
We were lucky to have great tenants our first year and never had to worry about rent coming in the door. Do your HW on the front-end to prevent pain down the road.
8.) Don't be penny-wise and pound-foolish
Do you really need the $1,200 washer over the $700 one? Probably not. But should you repair the damaged gutters that will lead to water damage down the road? Absolutely. When underwriting the deal, be sure to make conservative CapEx and maintenance assumptions to ensure you are keeping the property in the right condition to deliver stable, long-term returns.
9.) Find the right balance between outsourcing vs. insourcing
Depending on what stage of life you are at and what you are looking to get out of the investment, this balance of insourcing vs. outsourcing will vary for everyone
10.) Momentum breeds momentum
Systematize processes so you can leverage prior experiences to scale your portfolio with minimal speedbumps. Don't let a hurdle slow you down more than once and never let the ball stop rolling.
Hit the nail on the head with #8... About a month ago I noticed some slate shingles had slipped out of place. I kept this in the back of my mind as I was not able to gauge the extent of the issue, and thus didn't see a reason to take immediate action. Weeks later I get a call from my tenants stating that "after the rainstorm last night we observed a wet spot growing on the ceiling, and water is now dripping from the ceiling vent in the bathroom" Luckily I had underwritten the deal well, leaving me with plenty in CapEx savings.
Lessons learned... lessons learned.
